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James Buchanan interviews Friedrich A. Hayek (Part II)


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Dr. Hayek gives anecdotes on his interactions with colleagues, including Frank Knight, Max Weber and Ludwig Wittgenstein. His ideas in psychology from his book The Sensory Order, are examined. The socialist calculation debate is revisited, along with the role of governments in causing inflation and the business cycle, in addition to the importance he attaches to subjectivism in economic analysis. Other topics covered include the influence of religion and the reception of The Road to Serfdom.


Interview with Friedrich A. Hayek by James Buchanan Part II
Thanks to Pacific Academy Advanced Studies for permission to distribute this program.

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Digitization: Mario Estrada, Jorge Samayoa; content analysis: Alex Weller; content reviser: Daphne Ortiz, Jennifer Keller; publication: Rebeca Zuñiga

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BUCHANAN: Professor Hayek, a few minutes ago you were saying that the two influences to be countered in your younger days in Vienna were Marxism and psychoanalysis.  I know in the Hobhouse Lecture you also spent a good deal of time talking about the baneful influence of Freud and his ideas.  Perhaps you'd develop that a little bit. 
HAYEK: It's so difficult to generalize about Freud.  He was undoubtedly a very intelligent and observant man.  But I think his basic idea of the harmful effect of repressions just disregards that our civilization is based on repressions.  While he himself, as I point out in that lecture, became later rather alarmed by the exaggeration of these ideas by his pupils, I think he is ultimately responsible for the modern trend in education, which amounts to an attempt to completely free people from habitual restraints.  
After all, our whole moral world consists of restraints of this sort, and [Freud], in that way, has become in what I like to call the scientific destruction of values, which are indispensable for civilization but the function of which we do not understand.  We have observed them merely because they were tradition.  And that creates a new task, which should be unnecessary, to explain why these values are good. 
BUCHANAN: Well, this ties back to our other question.  Given this reading of the history of the last century, and given this destruction of these moral values, which we did not really understand why we hold, how can we expect something analogous to that to be restored?  Or how can we hope that can be restored? 
HAYEK: Well, I wish I knew.  My present concern is to make people see the error.  But that's an intellectual task, and how you can undo this effect-- Well, I have an idea the thing is on the whole effective via its effect on the teaching profession.  And probably that generation which has been brought up during the last thirty years is a lost generation on that point of view.  I don't think it's hopeless that we might train another generation of teachers who do not hold these views, who again return to the rather traditional conceptions that honesty and similar things are the governing conceptions.  If you persuade the teaching profession, I think you would get a new generation brought up in quite a different view.  
So, again, what I always come back to is that the whole thing turns on the activities of those intellectuals whom I call the "secondhand dealers in opinion," who determine what people think in the long run.  If you can persuade them, you ultimately reach the masses of the people. 
BUCHANAN: And you don't see a necessity for something like a religion, or a return to religion, to instill these moral principles? 
HAYEK: Well, it depends so much on what one means by religion.  You might call every belief in moral principles, which are not rationally justified, a religious belief.  In the wide sense, yes, one has to be religious.  Whether it really needs to be associated with a belief in supernatural spiritual forces, I am not sure.  It may be.  It's by no means impossible that to the great majority of people nothing short of such a belief will do.  But, after all, we had a great classical civilization in which religion in that sense was really very unimportant.  In Greece, at the height of its period, they had some traditional beliefs, but they didn't take them very seriously.  I don't think their morals were determined by religion. 
BUCHANAN: Well, that's hopeful, in any case.  Let me go back now to what I was getting at a little bit.  It's related to this early period in Vienna, too.  I was very pleased to hear you say earlier that you attribute a good deal of your subsequent thinking in political philosophy, political theory, to this insight that you gained in "Economics and Knowledge," or that was expressed first in "Economics and Knowledge"--this whole notion, as you mentioned a minute ago, of the fictitious data of the economist.  
As you know, there has been a big upsurge within the last decade in this country of the Austrian economics group, centered around sort of subjectivist notions of economics.  As you know, I got into the periphery of this in some work on cost, the subjective nature of cost, and so forth.  In rereading some of that literature, the central contributions were, of course, your contributions, made during the period you were in London, along with several of your London colleagues.  
What I'd really like to ask you and have you talk to me about would be: To what extent did this notion of the subjectiveness of economics--of the subjectivity of economic choice--to what extent did that come down to you through the Austrian economists, or to what extent was that part of this economics knowledge illumination that you felt at that time? 
HAYEK: Well, I believe I derived it directly from [Karl] Menger's original work.  I don't think there's much of it in the later Austrians, nor in Mises's work, and he's the real founder of the American school of Austrian economics.  I mean, the American school of Austrian economics was very largely a Mises school.  [Mises] had great influence on me, but I always differed, first not consciously and now quite consciously.  Mises was a rationalist utilitarian, and I am not.  He trusted the intelligent insight of people pursuing their known goals, rather disregarding the traditional element, the element of surrounding rules.  
He would even--No, he wouldn't accept legal positivism completely, but he was much nearer it than I would be.  He would believe that the legal system--No, he wouldn't believe that it was invented; he was too much a pupil of Menger for that.  But he still was inclined to see [the legal system] as a sort of rational construction.  I don't think the evolutionary aspect, which is very strongly in Menger, was preserved in the later members of the Austrian school.  I must say till I came, really, in between there was very little of it. 
BUCHANAN: Well, you mentioned the evolutionary aspect, but what I was really getting at more was the sort of subjectivist aspect--the subjective dimension of choice, which is very clear in your thesis. 
HAYEK: Oh, I think I would almost say that's the same thing in almost entirely different form.  If the decisive factor is the knowledge and attitudes of individuals, the particular question of preferences and utilities becomes a minor element in the individual action and habits being the driving element.  To me subjectivism really becomes individualism, methodological individualism. 
BUCHANAN: Oh, sure.  I think that's right.  One man whom I have been reading a good deal of this year, and who was at the London School of Economics at that time, more or less, as an older student, I would suspect, is [George] Shackle.  Did you know him very well? 
HAYEK: Oh, yes.  I discovered Shackle. 
BUCHANAN: I have sort of discovered him, too.  He's very good. 
HAYEK: Oh no.  I mean I discovered him in a very literal sense.  Shackle sent to me, when he was a schoolmaster in South Wales, an essay he'd written; nobody knew him.  But I encouraged him to elaborate it for Economica.  Then he came on a visit to London, and I've never seen a man more moved because he was speaking for the first time to a live economist.  It seems to have been a great experience in his life, and I was very impressed and got him a scholarship at the London School of Economics.  We've ever since been on very friendly terms, and I followed his development with great interest.  I think he's a firstclass mind. 
BUCHANAN: I find him to be grossly neglected among economists. 
HAYEK: I entirely agree. 
BUCHANAN: Because his material on choice under uncertainty-- To me, there's much in that that has not been digested at all by the profession. 
HAYEK: I know.  There's a very curious disagreement between two younger men of the London School of Economics who don't see eye-to-eye at all: that's John Hicks and Shackle.  I don't know why, but they move on parallel but completely non-converging ways; both, I think, think of the other as having done rather harm. 
BUCHANAN: I'm interested to get that story about Shackle, because I met him once and I found him to be a fascinating man.  His book Epistemics and Economicsis, I think, a great book.  
HAYEK: He's still very active thinking.  I traveled with him in Spain a year ago, and we lectured together. 
BUCHANAN: Let me shift a little bit, if I may, to ask you something on a slightly different topic.  I remember reading a piece that you wrote in Encountermaybe a decade ago, in which you talked about two kinds of mind.  Maybe you could tell me a little more about that. 
HAYEK: Oh, it's a very old idea of mine which, as I explained at the beginning of that article, I never wrote up because it would sound so frightfully egotistic in speaking about myself--why I feel I think in a different manner.  But then, of course, I found a good many instances of this in real life.  The first observed instance of other people was the relation between [Eugen von] Böhm-Bawerk and [Friedrich von] Wieser, who were of these two types: the one, whom I call the "master" of his subject, who had complete command of all his subject areas, and who can give you a prompt answer about what is the answer of current theory to this-and-this problem.  Robbins is another one.  In fact--
BUCHANAN: Which one, Böhm-Bawerk or Wieser?  Which one is which?
HAYEK: Böhm-Bawerk was the master of his subject; Wieser was much more what one commonly would call an intuitive thinker.  Then, later in life, I have known two types who are typical masters of the subject, and who, because they have the answer for everything ready, have not done as much original work as they would have been capable of.  The one is Lionel Robbins; the other is Fritz Machlup.  They both, to an extent, have command of the present state of economics which I could never claim to.  But it's just because I don't remember what is the standard answer to a problem and have to think it out anew that occasionally I get an original idea. 
BUCHANAN: Jacob Viner you'd put in that first camp, too. 
HAYEK: Oh, yes.  Oh, I think Viner and Frank Knight are another instance of the same contrast. 
BUCHANAN: Right, right, that's what I'm saying. 
HAYEK: And, in philosophy, Bertrand Russell and [Alfred North] Whitehead.  Bertrand Russell, a typical master of his subject; Whitehead, I think, has described himself once as a muddlehead, on the same ground: he didn't have the answers ready. 
BUCHANAN: So you have to start from scratch, in other words. 
HAYEK: No, but there's a sort of vague background map, which is not very precise but which helps you in finding the right way.  But the right way isn't clearly marked on it. 
BUCHANAN: Yes, I think I get the point.  Let me ask you  about your relationship, or did you know or how close were you, to Michael Polanyi?  Did you know him very well? 
HAYEK: Yes, he was for a few years my colleague on the Committee on Social Thought [at the University of] Chicago, and there was one interesting relationship for a period of ten years when we happened to move from the same problem to the same problem.  Our answers were not the same, but for this period we were always just thinking about the same problems.  We had very interesting discussions with each other, and I liked him personally very much.  
I think, again, he is a somewhat neglected figure, much more-- Well, I think he suffered from the usual thing: if you leave your proper subject, other people regard you as an amateur in what you are talking about.  But he was in fact very competent.  I would almost say he's the only noneconomist I know who wrote a good book on economics. 
BUCHANAN: Well, he was probably influenced by you in that Logic of Libertymaterial. 
HAYEK: Not much.  He knew a little about my ideas; we had a meeting in Paris in 1938, I believe, organized by the philosopher [Louis] Rougier, called "Colloque Walter Lippmann."  It was occasioned by Lippmann's The Good Societybook.  And that's when I first encountered Polanyi, and then we had some very interesting discussions.  But some of the essays in the Logic of Libertywere already written by that time.  The book appeared later.  But as I say, our minds moved on parallel courses, frequently giving different answers but asking the same questions. 
BUCHANAN: Well, I asked you whether or not you thought your notions had influenced Polanyi.  Let me ask the question more generally.  Among prominent thinkers, who are the men you think you have influenced most?  
HAYEK: I have influenced?
BUCHANAN: You have influenced, yes.  Or maybe that's an embarrassing question; maybe I shouldn't have asked that. 
HAYEK: It's not embarrassing; I just don't know.  I would have to think.  Shackle, whom I mentioned before.  I am convinced I have had a great influence on him.  I am discovering to my pleasure now that many of the very much younger generation--the men in their thirties--seem to be greatly influenced.  But among the older generation--the people who would now be in their fifties or sixties--offhand I can't think of any. 
BUCHANAN: Oh, I don't think there's any question of the group at [the London School of Economics]: Shackle and Ronald Coase.  Surely his ideas on cost were-- 
HAYEK: Yes, Ronald Coase probably, too.  You know, I had a curious influence on Hicks.  You won't believe it, but I told him about indifference curves.  He was a pure Marshallian before.  And I remember a conversation after a seminar, when he had been talking in Marshallian terms, when I drew his attention to [Vilfredo] Pareto.  It was the very beginning of the thirties, of course. 
BUCHANAN: Well, to go back to the Austrians again, were you actually a student of Böhm-Bawerk and Wieser? 
HAYEK: No.  Böhm-Bawerk, no.  Böhm-Bawerk died in 1915, when I was sixteen.  I happened to know him as a friend of my grandfather and a former colleague at [the University] of Innsbruck, and as a mountaineering companion of my grandfather's.  But when I saw him, I had no idea what economics was, because I was too young.  
I was a direct student of Wieser, and he originally had the greatest influence on me.  I only met Mises really after I had taken my degree.  But I now realize--I wouldn't have known it at the time--that the decisive influence was just reading Menger's Grundsetze.  And I probably derived more from not only the Grundsetzebut also the Methodenbuch, not for what it says on methodology but for what it says on general sociology.  This conception of the spontaneous generation of institutions is worked out more beautifully there than in any other book I know. 
BUCHANAN: Did you know Max Weber? 
HAYEK: No.  Vienna was full of his influence when I came back.  You see, he had taught in Vienna in the spring of 1918, when I was at the front.  He had gone to Munich that summer, and I came to the university [when it was] absolutely full of his influence.  I must say, all the girls were speaking about him because there had been hardly any boys at the university then.  
My hope had been-- In fact, I had a promise from my father that if I got my degree very soon I could go for a year to Munich to study under Max Weber.  But before it was possible, he died; so it never came off.  But there must have been in the atmosphere there a very great Max Weber influence.  Of course, I only read his stuff when his main book came out, which must have been 1921-1922.  He had very close contact with Mises, incidentally, during that short period when he was in Vienna. 
BUCHANAN: Do you think there's much lasting influence of Weber's ideas? 
HAYEK: I doubt it.  On one point he was clearly wrong.  I think the most famous thing about the Calvinist sources of capitalism is completely wrong.  Even beyond this, I rather believe that what is lasting is probably what [Alfred] Schutz has taken over.  But I must confess to my shame that I've never studied-- But he was a close friend; he was one of our Vienna circle.  I have never studied Schutz's work carefully, but I always intend to some day. 
BUCHANAN: I know Fritz Machlup has told me about that, and I've felt the same way--that I should do it--but I've never really done it.  I'd like to go back a little bit to this thing that you alluded to earlier: namely, this period in the thirties and this debate on the socialist calculation between [Oskar] Lange and [Abba] Lerner, on the one hand, and [Henry] Dickinson and Mises and yourself and others, on the other.  Looking back on that debate now, it's hard for some of us to believe that people could have been quite so naive as people like Lange were, to think that an economy could be computed in that sense. 
HAYEK: But they really believed it.  At least in the case of Lerner, I'm absolutely certain; he was somewhat more sophisticated.  Lange-- I became later a little doubtful whether he was really intellectually completely honest.  When he had this conversion to communism, as communism came to power, and was willing to represent his communist government in the United Nations and as ambassador, and when I met him later, he had at least been corrupted by politics.  I don't know how far he had already been corrupted in the thirties when he wrote these things, but he was capable of being corrupted by politics. 
BUCHANAN: But you think some of those-- It's hard, at least for me, to re-create the mind-set of those type of people who could-- 
HAYEK: Dickinson was an absolutely sincere and honest thinker.  I have no doubt about him.  He was a bit naive.  There was also conceit, but he strongly believed that these things he described would be possible--perhaps a little what the Germans call Weltfremd
BUCHANAN: I remember when you visited Charlottesville, we prevailed on you to give a very interesting short discussion of your relationship with your cousin [Ludwig] Wittgenstein.  I doubt if anyone else in these interviews is going to take that up; so maybe you could talk a little bit about that here. 
HAYEK: Well, you know, I have recently published in Encountera paper of my recollections of Wittgenstein.  I can't say I knew him well, but of course I knew him over a much longer period than anybody now alive.  My first recollection goes back to a day on furlough and leave of absence from the front, where on the railway station in Bad Ischl, [Austria], two young ensigns in the artillery in uniform looked at each other and said, "You have a fairly familiar face."  
Then we asked each other "Aren't you a Wittgenstein?" and "Aren't you a Hayek?"  I now know that at this moment returning to the front, he must have had the manuscript of the Tractatusin his rucksack.  But I didn't know it at that time.  But many of the mental characteristics of the man were already present as I gathered in this night journey from Bad Ischl to Innsbruck, where the occasion was his contempt for the noisy crowd of returning young officers, half-drunk; a certain contempt for the world.  
Then I didn't see him for a long time, but I heard a lot about it because his oldest sister was a close friend of my mother's.  They were second cousins, and she came frequently to our house.  There were little rumors constant about this crazy young man, but she strongly defended Wittgenstein, and that's how I heard about him.  But I came to know him much later in Cambridge.  I met him there before the war; I saw him in the later part of the war when he returned, but we did really never talk philosophy.  I have a strong impression of the kind of personality.  The last discussion I had with him was a discussion on politics. 
We were both returning from Vienna, but I had broken the journey in Bahl and stepped into a sleeping car at midnight in Bahl, and it turned out that my companion in the sleeping car was Wittgenstein.  And all during the first half of the following morning we were--as soon as he had finished his detective story--first talking about Vienna and the Russians in Vienna, and this led to talk about philosophy and ethical problems; he was bitterly disappointed about what he had seen of the Russians then.  
And just when it became interesting, we arrived at the port for the ferry.  And although he said, "we must continue this," he apparently regretted having gone out of himself, because on the ship he was not to be found, and I never saw him again. 
BUCHANAN: Speaking of Vienna, I remember--I guess it was in the fifties--you were telling me once about a project.  You had to get a lot of money--as I remember it, it was the Ford Foundation--to reestablish the University of Vienna back in the-- 
HAYEK: Well, to reestablish its tradition.  My idea was to create something like an institute of advanced studies, and to bring all the refugees who were still active back to Vienna--people like [Erwin] Schrödinger and Popper and-- Oh, I had a marvelous list!  
I think we could have made an excellent center, if the thing could have been financed.  But what grew out of it is the present Ford Institute in Vienna, which is devoted entirely to mathematics, economics, and statistics, which I don't particularly approve of.  I think the plan miscarried, not least because the University of Vienna did not display great enthusiasm for such a scheme. 
BUCHANAN: Not quite completely, because I'm going over in March to that institute to give some lectures, but to the political scientists, you'll be interested to know, not to the economists.  You're quite right about the economists. 
HAYEK: Well, it has, I believe, grown.  When I was there once about fifteen years ago for part of a term, it really seemed to consist entirely of econometricians. 
BUCHANAN: I think the economics people are pretty much that way; that's right.  But the political scientists are interested in public choice-- 
HAYEK: Well, that may be.  Probably the personnel has changed almost completely since. 
BUCHANAN: Well, I'm really straying a little bit from this whole topic of political theory, and I suppose we should try to get back on that topic somewhat.  I did want to bring in this Wittgenstein connection, because I thought that would be an interesting interlude in the conversation. 
HAYEK: I perhaps ought to add that I did, because I knew him, or knew the family, read the Tractatusalmost as soon as it came out.  And I was familiar with his thinking long before he was generally known.  But that is really an early acquaintance with his work, rather than a personal acquaintance with the man. 
BUCHANAN: I gather, in terms of your own training, it was pretty much strictly in economics.  You weren't influenced a great deal by any political-legal philosophy.  You studied law, of course. 
HAYEK: Yes.  My main study was law, but I divided my time almost equally between psychology and economics.  So it was these three subjects which I studied.  I did get a fairly good background of the history of political ideas from one of our professors, but no particular interest.  I just knew I could find my way about them.  But no strong interest in political theory or anything similar. 
BUCHANAN: And of course you wrote a book in psychology, too.  I remember that book. 
HAYEK: Oh, yes.  I still believe this is one of my more important contributions to knowledge.  And, curiously enough, the psychologists are now discovering it. 
BUCHANAN: Yes, I have seen some references within the last year or two. 
HAYEK: It's now twenty-five years old, and the idea is fifty-odd years old. 
BUCHANAN: Could you perhaps summarize that notion?  Or could you do it in a few minutes? 
HAYEK: Well, I think the thing which is really important about it, and which I could not do when I first conceived the idea, is to formulate the problem I try to answer rather than the answer I want to get.  And that problem is what determines the difference between the different sensory qualities.  The attempt was to reduce it to a system of causal connection--associations, you might say--in which the quality of a particular sensation--the attribute of blue, or whatever it is--is really its position in a system of potential connections leading up to actions.  
You could, in theory, reproduce a sort of map of how one stimulus evokes other stimuli and then further stimuli, which can, in principle, reproduce all the mental processes.  I say "in principle," because it's much too complicated ever to do it.  It led me, incidentally, to this distinction between an explanation of principle and an explanation of detail--pattern prediction, as I now know it--which I really developed in my psychological work and then applied to economics.  
BUCHANAN: Yes, I think pattern prediction is a very important concept that most economists still sort of miss.  And it does seem to me-- 
HAYEK: It's the whole question of the theory of how far can we explain complex phenomena where we do not really have the power of precise prediction.  We don't know of any laws, but our whole knowledge is the knowledge of a pattern, essentially. 
BUCHANAN: I think that's very important and has been missed.  And I think, again, to go back to what you attributed a lot to the utilitarians, I think the utilitarian mode of thought had a lot of influence toward preventing that sort of way of going. 
HAYEK: Oh yes, oh yes.  In a way, you know, I am becoming aware that the positivist conceptions of science, which I assumed was only invented in the middle of the last century by Auguste Comte and those people, goes back much further.  It's a Newtonian example of how you could reduce all scientific knowledge to very simple laws--that one thing was a function of only one or two other magnitudes.  And this conception of a single function is a prototype of a scientific explanation.  It had probably a very profound effect from the late eighteenth century on scientific thinking generally. 
BUCHANAN: Of course, that does have its virtues, as has been proven; but, on the other hand, I think in places like economics, when dealing with human interaction in particular, I think it's had major drawbacks.  One thing has concerned me, and I don't know to whom you attribute it, really--maybe Hicks is partly responsible--and that is when once the mathematicians start putting down utility functions, and putting a formula in for utility functions, they have already excluded so much of the problem that, in fact, they neglect what is really going on. 
HAYEK: I quite agree.
BUCHANAN: I think that one-- I was just talking to Professor [Armen] Alchian earlier that one of the things-- In a sense, I'm influenced partly by just reading Shackle recently.  There's been a tremendous neglect of the notion of emergent choice: [the idea] that we don't really have before us objects among which to choose; we create them in the act of choice.  Arbitrage, really, has not become central to economics like it should be, it seems to me.  That's part of this whole subjectivist, Austrian, whatever you want to call it, type of an approach to economics.  But do you see much hope for-- There's been a little upsurge of interest in this among young people in the United States, but the dominant graduate schools are still predominantly the other direction. 
HAYEK: Certainly, but the other thing is spreading.  What I'm afraid of is that people will get disappointed because what we can know in the field of economics is so much less than people aspire to.  Much of this tradition you are speaking about--my tradition--is really more indicating barriers to further advance than leading to further advance, and that may well lead to a disappointment again among these young people.  
They are more ambitious, and of course the great bulk of econometrics and all this claims to be able to make predictions which I believe are impossible.  But people don't like to accept an impossibility, and of course there is a certain widespread view that nothing is impossible.  Hundreds of things which science has said are impossible were proved to be possible; so why shouldn't this be possible?  You can't prove that it's impossible. 
BUCHANAN: This was the main thrust of your Nobel Prize lecture.  I guess you're saying that economics is unique in this respect, compared to other disciplines.
HAYEK: Oh, no.  It's a general problem of having complex phenomena.  You encounter this already in the field of biology, to a very large extent.  You certainly encounter it in the theory of biological evolution, which has not made any prediction--it can't possibly make any predictions.  I think it's true of linguistics, which is the most similar in structure to economics.  Well, I don't know where there is another social science proper, except economics-- 
BUCHANAN:  But I meant unique in the sense of having expectations so different from its possible accomplishments. 
HAYEK: Oh, I see.  I think that is at least particularly characteristic of economics, yes. 
BUCHANAN: So, in a sense, we're in a bigger methodological muddle. 
HAYEK: Yes, yes.  There's no emotional disappointment in the other fields when you recognize that you can't find out certain things; but so many hopes are tied up with the possible control and command over economic affairs that if a scientific study comes to the conclusion that it just can't be done, people won't accept it for emotional reasons. 
BUCHANAN: "Every man is his own economist"--that's part of the problem and has been all along.  I remember in that  connection a very good book--again, it ties back to the London days--which raises the name of another man who was clearly influenced by you: Bill Hutt.  He wrote a book, Economists and the Public.  His name ought to be mentioned in this London connection. 
HAYEK: To that book I have even given the title. 
BUCHANAN: Oh-- I think again, like Shackle, Hutt is a much neglected economist. 
HAYEK: Yes, of a quite different type.  He has a very clear mind, but not as profound as Shackle has.  I think his great advantage is clarity and simple thought, which you can't say of Shackle, whose thought is not simple. 
BUCHANAN: That's really true.  What were your relationships with Frank Knight? 
HAYEK: Personally, very good.  We had several very friendly controversies.  I think we were always more puzzled by each other than anything else.  It was not a real meeting of minds.  With great effort, you know, we had some serious discussions, but somehow we were talking mostly at cross-purposes. 
BUCHANAN: Certainly on the capital theory.  I've always wondered why, knowing Knight very well as I did--of course later--and knowing his work and his interests, why he, in a sense, got diverted intellectually into capital theory.  For years he spent attacking the Austrians, essentially. 
HAYEK: He was frightfully dogmatic about it.  He asserted that he was absolutely certain, and he had very few arguments to justify it.  I always assumed it must have been some very early teaching which he had absorbed and to which he had stuck; he hadn't done any further thinking about it, but he felt that it was one of the foundations of his economics, to which he had to stick. 
BUCHANAN: Well, but he always said that he came to that.  He accepted the view--essentially the Austrian view--for a long time, but he somehow got converted away from it.  I don't know exactly what was the-- 
HAYEK: Yes, what led him to this I don't know. 
BUCHANAN: But you weren't at [the University of] Chicago at that time; so there were no direct-- 
HAYEK: No, no.  I can't say I didn't know him when we had the controversy, but I had just met him once or twice in various places.  But it was only when I came to Chicago that I really came to know him.  It was very late, when his interest was much more religion than economics. 
BUCHANAN: That Committee on Social Thought, which you were involved in at Chicago-- That produced some interesting students who came out of that-- 
HAYEK: Oh, yes; oh, yes.  You see, it was never explicitly so defined, but it was in effect devoted to the study of borderline problems in the social sciences.  We were not limited in any way.  
Study of scientific methods had a great influence in that crowd, and the first year I was there was, of course, the most fascinating experience of my life.  I announced a seminar on comparative scientific method, and the people who came included Sewall Wright, the great geneticist; Enrico Fermi, the physicist; and a crowd of people of that quality.  It only happened once; we couldn't repeat this.  But that first seminar I had in Chicago was one of the most interesting experiences I had.  [It was] entirely on the method of science. 
BUCHANAN: It seems to me that this is something that we're lacking now, at least in American graduate schools and professional schools--this opportunity for students to really get into these basic philosophical types of questions and issues.  In the law schools, for example, legal philosophy has been waning; in politics, political philosophy is not as important as it was; there's no economic philosophy in economics departments.  I don't know, for example, where--and I'd like to get your comments on this--in a regular curriculum, a student could get exposed to your books or my books, for example. 
HAYEK: I know too little about American universities, but my general impression is the same.  I have now, from a distance, the feeling that there may be something like that in UCLA. 
There was for a time in Chicago-- You see, Chicago had more interdepartmental contacts than I have encountered in any other American university.  And it owes it very largely to the facility of the Quadrangle Club, where you really talk to people from all other subjects and meet them.  I know no other American university where that is true; it certainly was not at the London School of Economics, which was so highly specialized to the social sciences and which made me in the end a little tired.  
Although in my time the London School of Economics was probably the leading center, still, in economics, it was narrowly specialized and had no contact with other subjects.  [There were] certainly no interesting philosophers until Karl Popper came, and that was nearly in the last moment prevented by the positivists.  
They didn't succeed, but when he-- I had tried to support the attempt to get Karl Popper and persuade the academic council to appoint him by rushing out the publication of his The Poverty of Historicism, and that nearly destroyed his chances, because it so offended all the positivists.  But it was too late to stop it.  Still, one of my sociology colleagues made serious attempts to stop the appointment at the last moment. 
BUCHANAN: Yes, I think I'd heard something of that story.  But is it as much the necessity of having contacts with other disciplines as it is within each discipline too much concentration on formalism?  At least in economics, it seems to me that students aren't anywhere challenged to think about the broader questions. 
HAYEK: Well, I don't know what the cause is, but there is a great difference in people confining themselves to examination subjects and people reading about and moving into subjects which are not directly relevant to what they will be examined about.  In the American universities I know, with the sole exception of the Committee on Social Thought, people rather do concentrate on equipping themselves for the examination and probably for an assistantship or something later in a special subject.  
This is certainly very different from my recollection of study, where you had to do your subject, but you spent most of your time exploring other fields, exploring related fields.  I mentioned before it was entirely possible to be not only nominally a law student but to do all your law exams with quite good success, and yet be mainly interested in economics and psychology. 
BUCHANAN: How do you explain--to shift the subject now--the revival, so to speak, of sort of Marxist notions in so much of Europe and, to some extent, in this country? 
HAYEK: I don't know.  I don't think on the European continent there is really a revival; there has been a continuous strain [of this].  There is [a revival] in the English-speaking world; there has been for quite some time.  What the cause of this is, I don't quite know.  I believe it was Solzhenitsyn who recently said that there's no person in Moscow who any longer believes in Marxism.  That's probably the only place in the world where that is true.  I just find it so difficult to understand what makes people believe these things.  I cannot see that it's intellectually respectable at all. 
BUCHANAN: Yes, ideas which have been discredited; yet it does seem, say compared with twenty years ago, there's more talk of Marxism now, outside of the-- 
HAYEK: Yes, that's probably true. 
BUCHANAN: Certainly in Japan, especially in the academy, in the universities. 
HAYEK: Yes; oh, yes.
BUCHANAN: And so, they tell me--you would know better than I--but they tell me that some German universities are dominated by Marxists. 
HAYEK: Oh, yes, they are.  I mean, I haven't encountered-- There's no noticeable influence of it at Freiburg; but there is a place like Bremen, which I am told is a completely Marxist institution.  And there's a very great influence of that curious institution in Frankfurt, the Institut fur Sozialwissenschaften, where now [Herbert] Marcuse is the main figure, who made his reputation by combining Marxism and psychoanalysis. 
BUCHANAN: I heard a rumor at Altdorf a month ago that [Ralf] Dahrendorf may be going there, and if so he might straighten it out.  Have you heard that? 
HAYEK: Well, he seems to be negotiating with various German institutions.  There was the suggestion of the foundation of a new Max Planck Institute for him. 
BUCHANAN: Maybe that's what I'm thinking about. 
HAYEK: It may well be, and that of course confirms the-- He has a great success at the London School of Economics, and what I rather had feared--that his nerves wouldn't stand it--has been untrue.  He seemed to me a hypertensive character who might break down any moment; no sign of that at all.  But I warned them, "You won't keep him very long; he is not a person who will stay anywhere very long."  And that seems to be true.  His interest is already shifting.  But his feelings are settled there; he's as good a director as they've ever had. 
BUCHANAN: But in terms of his ideas, he seems to be coming around more and more to the position that would not be too different from your own. 
HAYEK: He fluctuates.  I don't think his development is very steady.  He was at one time very enthusiastic about my Constitution of Liberty, and that was soon after it appeared.  Then for a time he very definitely moved again away from that position.  I think he's again coming closer. 
BUCHANAN: He told me-- I had lunch with him, and he told me that one of the most important events that had happened in the last decade was Proposition 13 in California, which I thought was an interesting indication.  
HAYEK: Very interesting; quite unexpected to me. 
BUCHANAN: Well, Professor Hayek, I want to thank you very much for this chance to chat with you. 
HAYEK: It was pleasant.
Dock windowTable of Contents
Influence of Sigmund Freud
Importance of religion
Subjectivism in economics
George Shackle
Two kinds of mind
Michael Polanyi
Hayek’s university professors
Max Weber
Socialist calculation debate
Ludwig Wittgenstein
Vienna as a center of economics
Influence of legal theory in Hayek's intellectual development
The Sensory Order
Complexity in economics
Bill Hutt
Frank Knight
American system of graduate education
Interdisciplinary studies
Marxism in Europe
Ralf Dahrendorf
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